Which L.A. Submarket Is Seeing the Most Industrial Development?
San Gabriel Valley has seen the bulk of industrial new construction in the last decade, with 36% of total development.
“As the San Gabriel Valley is one of the most sought after infill industrial markets in Greater Log Angeles, institutions are going after any and all land/redevelopment opportunities that pencil in,” Eric Chou, VP at JLL, tells GlobeSt.com, adding that one project—a 1 million square foot redevelopment project in South El Monte that was originally part of the Safeway portfolio—helped to boost the new construction statistics in the San Gabriel Valley market. “Another huge reason is that the Irwindale/Azusa areas have historically had underutilized land,” he adds. “We are seeing a conversions from gravel quarries to useable industrial land- essentially industrial land is being created.”
The significant new construction activity, demand for industrial space and dearth of available land has had a huge impact on land prices in the San Gabriel Valley. “Land prices in the San Gabriel Valley are sky rocketing,” says Chou. “The development activity of roughly 1.4 million square feet is really a very small percentage (0.8%) of the total inventory of approx. 153 million square feet. The scarcity of land, rising rents, low vacancy, and protracted development processes, all contribute to creating upward pressure in land values.”
Moving forward, Chou expects strong demand in the San Gabriel Valley market and continued development activity—when possible. The limited availability of land will slow new construction, but when land or redevelopment sites are available, developers will take the opportunity to being new supply to the market. “Any and all land and redevelopment opportunities that hit the market which pencil in with institutions will likely be purchased immediately,” he explains. “I foresee development activity to curtail not due to the lack of demand but from the lack of supply of land. Given the tight infill market where there is not much entitled or raw land, I believe developers will likely aggressively target off-market low building coverage sites such as contractors’ yards.”
As a result of the tight market, investors looking to be active in the market will need to look for creative ways to develop new industrial product. “I suspect, as the market continues to tighten with limited land supply but rising building demand, institutions will have to get creative in their acquisitions,” says Chou. For example, investors might purchase businesses with the land site to get these private owners to actually sell.”